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Individual Voluntary Arrangements Explained
[CENTER][SIZE=5][COLOR=#ff8000]IVA's Explained[/COLOR][/SIZE][/CENTER]
[SIZE=5][COLOR=#ff8000]What is an IVA[/COLOR][/SIZE]
IVA stands for Individual Voluntary Arrangement. It is an arrangement that an insolvent person has agreed to enter into between him/her and the organisations they owe money to. The arrangement results in reduced payments in order to pay off part of the money owed and usually, after 5 years, the remainder of the debt can be written off. In order to enter into an IVA a person has to be classed as insolvent, which means they are unable to pay debts due to having more liabilities than assets. Normally a person will have to be classed as having a significant debt problem (debts over £10,000). From being insolvent a person (or business) needs to take action. This could be to consolidate debt, arrange an IVA (individual voluntary agreement), or become bankrupt.
During the 5 years that debt repayments are made, all interest charges are frozen and no correspondence is received from the creditors. You normally deal only with the company involved in setting up the IVA, which has to be a licensed professional. If you own your own home you may have to release equity by remortgaging or taking out a secured loan on the property.
An IVA is an agreement between you and your creditors that is legally binding and gives you the opportunity to protect important assets, such as your home. An IVA is different to bankruptcy and is designed to avoid some if the stigma and issues that surround bankruptcy; however, an IVA should not be seen as an easy option.
[SIZE=5][COLOR=#ff8000]How IVA's Work - Applying for an IVA[/COLOR][/SIZE]
It can take a couple of months from when you first apply for an IVA to get it all set up.
[LIST][*]You will need to complete an application form for one of the companies that deal with IVA's - Individual Voluntary Agreements. You will need to disclose your financial situation as well as including copies of recent bank statements, pay slips, mortgage statement, property valuation, creditor's letters/statements[*]Having received your application, the company you are dealing with will contact you to discuss your situation and the IVA application[*]If your application is accepted you will become part of the IVA - Individual Voluntary Arrangement programme and will be assigned an Insolvency Practitioner to work with, if you have not been already[*]The Insolvency Practitioner will then act on your behalf to contact all of your creditors to inform them that they are your legal representative and that an IVA proposal is being put together[*]An IVA proposal will be drafted. This sets out the actual terms of the IVA - how much you will pay and so on[*]The IP will obtain an 'interim order'. An interim order provides you with protection from your creditors issuing or continuing with bankruptcy proceedings[*]A statement called a 'nominees report' is prepared with gives a professional opinion as to whether the IVA is a genuine offer[*]A meeting of your creditors will be held. This will be to vote on whether the IVA goes ahead or not. Creditors will usually not attend in person, rather they will send a letter or fax outlining whether they agree or not. Any creditors that do express an opinion are taken to be in favour. For the IVA to be accepted creditors representing over 75% of your debt must be in favour[*]Once the IVA is approved your are legally obliged to keep up your monthly payments and your creditors should not contact you directly[/LIST]
[SIZE=5][COLOR=#ff8000]How IVA's Work - During the IVA[/COLOR][/SIZE]
An IVA (Individual Voluntary Agreement) is designed so you make one monthly affordable payment, over the period of the IVA. The payment is made to your Insolvency Practitioner, who in turn deals with your creditors and sorts out money owed to them on your behalf in accordance with the terms set out in the IVA.
The Individual Voluntary Agreement (IVA) is legally binding. You must ensure you keep up with your monthly payments or action may be taken against you and you will most likely be made to go bankrupt. If this happens the cost of the IVA will be added on to your total debt. During the IVA period your financial situation will be explored and reviewed on a regular basis. If there has been a change in your circumstances, for example an increase in income, or a sudden windfall, you may be asked to pay more money to your creditors, in accordance with the terms set out in the IVA. You are not to obtain any further credit or loans during the period of the IVA.
[SIZE=5][COLOR=#ff8000]How IVA's Work - After the IVA[/COLOR][/SIZE]
If you have an endowment policy linked to your mortgage you may be expected to cash it in and use the money towards paying part of your IVA (Individual Voluntary Agreement). If your property has equity you may be asked to release it at some point, also to pay into the IVA.
After the period of the IVA is complete the debtor will be considered to be debt free, as some of the remaining debt may be written off. The debtor is then free to start a fresh financially. Once the IVA is complete it is often difficult to obtain credit again for around a year or two after the termination of the agreement. However it is easier to obtain credit once your debt problem has been settled and many lenders will make a decision based on your successful completion of an IVA and what you can afford to pay.
[SIZE=5][COLOR=#ff8000]What is an IVA[/COLOR][/SIZE]
IVA stands for Individual Voluntary Arrangement. It is an arrangement that an insolvent person has agreed to enter into between him/her and the organisations they owe money to. The arrangement results in reduced payments in order to pay off part of the money owed and usually, after 5 years, the remainder of the debt can be written off. In order to enter into an IVA a person has to be classed as insolvent, which means they are unable to pay debts due to having more liabilities than assets. Normally a person will have to be classed as having a significant debt problem (debts over £10,000). From being insolvent a person (or business) needs to take action. This could be to consolidate debt, arrange an IVA (individual voluntary agreement), or become bankrupt.
During the 5 years that debt repayments are made, all interest charges are frozen and no correspondence is received from the creditors. You normally deal only with the company involved in setting up the IVA, which has to be a licensed professional. If you own your own home you may have to release equity by remortgaging or taking out a secured loan on the property.
An IVA is an agreement between you and your creditors that is legally binding and gives you the opportunity to protect important assets, such as your home. An IVA is different to bankruptcy and is designed to avoid some if the stigma and issues that surround bankruptcy; however, an IVA should not be seen as an easy option.
[SIZE=5][COLOR=#ff8000]How IVA's Work - Applying for an IVA[/COLOR][/SIZE]
It can take a couple of months from when you first apply for an IVA to get it all set up.
[LIST][*]You will need to complete an application form for one of the companies that deal with IVA's - Individual Voluntary Agreements. You will need to disclose your financial situation as well as including copies of recent bank statements, pay slips, mortgage statement, property valuation, creditor's letters/statements[*]Having received your application, the company you are dealing with will contact you to discuss your situation and the IVA application[*]If your application is accepted you will become part of the IVA - Individual Voluntary Arrangement programme and will be assigned an Insolvency Practitioner to work with, if you have not been already[*]The Insolvency Practitioner will then act on your behalf to contact all of your creditors to inform them that they are your legal representative and that an IVA proposal is being put together[*]An IVA proposal will be drafted. This sets out the actual terms of the IVA - how much you will pay and so on[*]The IP will obtain an 'interim order'. An interim order provides you with protection from your creditors issuing or continuing with bankruptcy proceedings[*]A statement called a 'nominees report' is prepared with gives a professional opinion as to whether the IVA is a genuine offer[*]A meeting of your creditors will be held. This will be to vote on whether the IVA goes ahead or not. Creditors will usually not attend in person, rather they will send a letter or fax outlining whether they agree or not. Any creditors that do express an opinion are taken to be in favour. For the IVA to be accepted creditors representing over 75% of your debt must be in favour[*]Once the IVA is approved your are legally obliged to keep up your monthly payments and your creditors should not contact you directly[/LIST]
[SIZE=5][COLOR=#ff8000]How IVA's Work - During the IVA[/COLOR][/SIZE]
An IVA (Individual Voluntary Agreement) is designed so you make one monthly affordable payment, over the period of the IVA. The payment is made to your Insolvency Practitioner, who in turn deals with your creditors and sorts out money owed to them on your behalf in accordance with the terms set out in the IVA.
The Individual Voluntary Agreement (IVA) is legally binding. You must ensure you keep up with your monthly payments or action may be taken against you and you will most likely be made to go bankrupt. If this happens the cost of the IVA will be added on to your total debt. During the IVA period your financial situation will be explored and reviewed on a regular basis. If there has been a change in your circumstances, for example an increase in income, or a sudden windfall, you may be asked to pay more money to your creditors, in accordance with the terms set out in the IVA. You are not to obtain any further credit or loans during the period of the IVA.
[SIZE=5][COLOR=#ff8000]How IVA's Work - After the IVA[/COLOR][/SIZE]
If you have an endowment policy linked to your mortgage you may be expected to cash it in and use the money towards paying part of your IVA (Individual Voluntary Agreement). If your property has equity you may be asked to release it at some point, also to pay into the IVA.
After the period of the IVA is complete the debtor will be considered to be debt free, as some of the remaining debt may be written off. The debtor is then free to start a fresh financially. Once the IVA is complete it is often difficult to obtain credit again for around a year or two after the termination of the agreement. However it is easier to obtain credit once your debt problem has been settled and many lenders will make a decision based on your successful completion of an IVA and what you can afford to pay.